First of all, that is ok. No one can know anything without taking time to learn it. And some matters can feel so complex that they get pushed back.
As Richard Feynman once said referring to the classroom environment: “It's important to let students know that not knowing is not failure, but the first step to understanding.”
While there are a lot of technical terms and jargon involved, there is something you should always have in mind: all of them represent something.
Now it’s up to us to help you make the connections between them and reality as we look through some of the available assets out there.
Shall we begin?
It’s almost impossible to talk about investing without talking about stocks. This probably brings up images of Wall Street finance and the Stock Market (notably the New York Stock Exchange) - maybe from movies or from the news and it is basically because this is the main stock market in the world.
So, what are stocks?
At the most basic level, a stock represents a part of a company.
When you own a stock, you become a shareholder in exchange, the company is able to get a new source of financing. As the company goes up and down in value, so does the value of your stock, which you can sell at any stage.
While they can generate very interesting returns, the biggest problem lies in picking stocks, which makes you vulnerable to unforeseen events.
The Buzz Aldrin of investing (stocks being Neil Armstrong). It’s what you most likely hear about after stocks - “stocks and bonds, stocks and bonds…”
Bonds represent debt. Not your debt, but a company’s or government agency.
When bonds are issued, these entities are seeking capital to finance a project or a purchase. In return, they offer to pay interest which varies between the issuers: public and private sector. Essentially, you are loaning them money.
They usually are associated with a mid- to long-term on your investments, so you will not be able to access your capital without incurring in a penalty if you need to before they reach their maturity.
Bond rates typically go hand-in-hand with interest rates.
Some people get confused at this part, but it really doesn’t need to be complicated.
If with stocks and bonds you pick individual investment units, should you decide to invest in a mutual fund, your money gets pooled together with funds raised from other investors.
A team of professionals is in charge of investing these funds, spreading them through different asset classes, which include stocks and bonds.
So your returns are based on the aggregate performance of these assets.
A disadvantage you may find is that this team of professionals needs to be paid to perform this service. So not only do you typically need a minimum of capital to invest, you must also look out for commissions when assessing if this option is for you (although you can also find some low-cost alternatives nowadays).
This one is built upon currency rates. Basically, you convert your money into another country’s currency, hoping to take advantage of different market forces that make it go up or down in value.
For instance, lately with the Brexit phenomenon, we’ve seen the pound go down in value for some time, as instability of events created financial market speculations and which now made it a less desirable currency.
Given all the factors affecting it, it is a very complex market, and easy to get lost if you don’t know what you are doing.
A fairly recent form of digital currency.
If a currency is centered in a sovereign country, one of cryptocurrency’s central points is that it is a decentralized system, relying on a vast worldwide network of computers to keep its integrity - what is called the blockchain.
Several of these exist, the most famous being Bitcoin.
There is still a lot to be learned from this, and no one really knows how it is going to change the financial landscape for sure.
For this, they are considered high-risk to invest, as they are very volatile.
Peer-to-Peer lending (or crowdlending)
Lending directly from peers without the intervention of a traditional financial institution.
Borrowers and lenders are connected through a digital platform, borrowers provide the necessary information, and lenders decide to invest in one or several of the available loans.
This can result in better rates for both sides, but it can be taxing on the lenders to decide on where to invest.
And then there’s us
In line with financial marketplaces we won’t be lecturing you or pitching our products (especially since odds are that you are already a customer and if you're not one yet, just bear in mind that it is possible to invest from 1€ and start to get a return on it). You can find all about it here.
Every asset listed here has its strengths and weaknesses and depends very much on your own personal situation to assess whether they can be right for you or not.
Since this isn’t a comprehensive analysis on all there is to know, we hope that you can feel a bit more enlightened, and maybe more curious to explore this on your own.
Just remember that old investment advice - don’t invest in what you don’t understand.
And don't forget you can share us with everyone.